Statement on Proposed 2014 Budget and Strategic Plan

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Date

Nov. 25, 2013

Speaker

Lewis H. Ferguson, Board Member

Event

PCAOB Open Board Meeting

Location

Washington, DC

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I support the Board's Budget for 2014 and the accompanying Strategic Plan for 2013-2017. In 2013, the Board focused on a careful oversight of its budgetary resources to manage the reduced spending mandated by the sequester order. We tried to do this without sacrificing achievement of the goals and priorities set out in the 2013 Budget and the prior strategic plan.

The Office of General Counsel at the PCAOB has worked tirelessly to advise the Board about the legal requirements of the sequester and the budget staff has advised us on alternatives for achieving our goals in the face of the reductions in spending. Thanks in large part to their work, I am satisfied that we have made good progress toward the tasks mandated by Congress in Sarbanes-Oxley and in Dodd-Frank, despite the constraints imposed by the sequester. Indeed, we have been able to make progress on our important near term priorities.

As I mentioned in my statement last year, and as reflected in the near term priorities, the PCAOB is working to find ways to improve audit quality, including communicating our findings more effectively to the audit firms we regulate and to the public. In 2013, we commenced a project led by our Office of Research and Analysis to develop an understanding of the drivers of audit quality and I look forward to a concept release in this area which we anticipate issuing in the first half of 2014. The PCAOB is also making progress in its outreach to, and interaction with, audit committees. In 2013, we have begun to reach out to this constituency in new ways to help audit committees understand our work, and how our work can inform their work in dealing with the auditors they oversee.

The 2014 budget provides for a new Center for Economic Analysis. I support the development of this new Center, as it offers the Board the opportunity to attract top flight thinkers to the PCAOB. Our hope and expectation is that they will assist the PCAOB in looking creatively at, among other things, the operation of PCAOB programs, the role and effectiveness of auditors in a rapidly evolving business environment, and the effects of audit regulation in increasing investor protection. This new Center is an experiment, and as with any experiment, we must review and evaluate it as it evolves to ensure it is contributing to achievement of our mission. Overall, I feel strongly that this is the kind of innovative step that an organization such as the PCAOB should be taking to make creative contributions toward fulfilling our mission.

The 2014 budget also provides additional funds for the PCAOB's participation in the International Forum of Independent Audit Regulators (IFIAR) in the coming year. In 2013, I was elected to the position of Chair of that organization, and I am deeply grateful to my fellow board members and the staff of the PCAOB for the support they have given me in this role. Our Office of International Affairs has led that effort, but we expect to draw on resources in 2014 from the Office of Research and Analysis, the Division of Registration and Inspections, and the Division of Enforcement and Investigations. Audit quality is a global issue, and many of the public issuers audited by firms registered with the PCAOB are multinational companies, listed on several exchanges, and audited by global network firms employing member firms in many different countries. For this reason, global improvements in audit quality directly benefit stakeholders in the United States. Indeed, many of the priorities of IFIAR echo the near term priorities of the Board, particularly the priority to improve the communication of the regulators' findings to stakeholders.

IFIAR's work contributes to global audit quality in many ways, including by assisting developing and mature regulators to refine their inspection programs through a multi-day inspections workshop. We are also working to develop common views on significant policy issues to be sure that the collective experience of regulators is gathered, analyzed, and communicated to the audit stakeholders and standard setters. One of the most significant workstreams of IFIAR, to which the PCAOB contributes heavily, is the IFIAR survey of global inspections finding. Through this survey, we develop a better understanding of the types of issues with audit quality that regulators are seeing around the world.

In 2014, this budget allows the PCAOB to support IFIAR actively, and to play a leading role in the organization.

For all of these reasons, I support adoption of the PCAOB's 2014 Budget and the strategic plan for 2013-2017.